Video Transcript: Does IT Matter?

Hello and welcome back to our Introduction to Information Systems. And you are over halfway done. We are in week seven, officially, and we're going to be  asking the question and answering the question today, does IT even matter?  And we started talking about this in module one, but we're going to circle back  and really give us some due diligence today. But first, I would love to, as usual,  start us off in prayer. So if you would like to pray with me, Dear Heavenly Father, I'd like to thank you for this opportunity to learn together. I'd like to thank you for  we've come to you for wisdom as we are trying to learn new things, for bravery,  of getting courage up to take a chance and take a course and learn something  new. And please bless every student who takes that leap of faith and is going  where they feel called, and we just appreciate so much that opportunity that  they're able to learn new skills and advance in their families and their careers to  be able to serve you even better. So thank you, and in your heavenly name, we  pray amen. Week seven, let's jump right in. We're going to put up here. Does IT  even matter? And of course, we are talking back to Carr's argument and the  Harvard Business Review. Does IT matter? That is one of the supplemental  readings that I would highly recommend you take a look at. And he says,  Actually, his his article in the in the Harvard publication was, IT does not matter.  And so we're going to take a look at that, the learning objectives for this as we  are wrapping up the day to day and moving on to module eight, we hope that  you'll be able to define that productivity paradox and explain the current thinking  on what you think of the productivity paradox, and we're going to jump into that  in just a moment. Again. We're going to evaluate Carr's argument. We're going  to describe the components of competitive advantage, and this is where I think,  this, course, really starts to get fun, when we talk about how we've been learning about these tools and all the components that make up an information system,  and now we get to actually talk about how they are useful to make a competitive advantage for your organization, and then we're going to describe information  systems that provide businesses. So we're going to talk about what makes a  competitive advantage, and then how information systems play into those  advantages, and what you can do to make your organizations even stronger. So we're going to jump into that productivity paradox. All right, so this is in 1991 and the paradox was with studying, what should the investment be in IT and  productivity? Is it worth it if investing heavily in your resources and your time and your treasure into IT. Does it really pay off in productivity? And the studies that  were realized by this paradox was they were not realized at all that these these  gains that they expected to see by implementing these IT strategies, they just  weren't paying off in productivity. There we go. Hello again. And so why was that the case? That the productivity paradox didn't come out in a positive direction?  And so we're going to talk about that mismeasurement of outputs and inputs.  Was there really an accurate measurement going on during these studies?  Were there lags due to learning the new systems and the technology and 

adjusting and training, redistribution and dissipation of profits and then  mismanagement of information and and the technology itself. So this was done,  and again, like we said, 1991 and my question to you would be to really stop  and think if this was done today and the baseline being different and not having  to account for all of the ways that we have to, you know, adjust to these new IT  protocols. A lot of us are starting with that baseline of having IT be part of our  daily. The organizations in our daily lives. If we were to have the study done  today, do you think there would be the same findings on if productivity was really increased with IT? Maybe, maybe not, something for you definitely to think  about Nicholas Carr in the Harvard Business Review, again, now this is bumped up to 2003 he did write that article. IT doesn't matter which is in the resources,  the extra readings for you. So IT is really less of a differentiator because it's so  widespread at this point, if your organization is investing heavily in IT, that's  great. So is everybody else. It's not really that differentiator that's going to give  your organization a competitive advantage anymore. IT really is kind of par for  the course that you would be investing in some of these IT tools. It's also so  readily available, and the software is so easily copied that, you know, It's not  really that new tools don't really give companies that sustained competitive  advantage that they used to because their copy and pasted everywhere. It's it's  the Canal Street of of the organizations that you can go in and pick whatever  software suite you want, whether that's a true copy, whether that's an official  license or not, but all organizations are really benefiting from these tools. So IT  you need to find another way other than IT. For some of this, some of this dip,  some of these differentiators that we're going to be talking about. So what car  suggested was that technology is a commodity, and it should be managed like  one, but you need to wait until it's cost effective to adopt some of these. IT  things technology is brand new and almost at that brink of being cost prohibitive. We want to make sure you know, waiting until it's at a low cost, low cost point  will definitely make those games more realistic for you and your organization. So not just low cost, we also want to make sure it's low risk, so that you adopt the  IT solution slowly, so other companies can take those high risk and try out a new technology and change their whole organization over overnight, and you can  kind of sit back and watch what happens and have a case study before your  eyes, instead of jumping there yourself, of going a low risk approach and going  slowly to adopt some of these new IT tools, IT should operate as a utility in a  company, good service with minimal downtime. So one of those things, your  company has electricity, and your company likely has a water connection, your  company should have IT in that same vein of having those standards of good  service and maintenance with minimal downtime to make sure that these  investments that you are making are going to be paying off and make IT actually worth it. Okay, we're going back to Harvard again. So this is Michael Porter of  Harvard and talking about competitive strategy. So in the late 70s, Michael 

Porter developed three models to help us think about strategy when it comes to  our businesses and organizations on an enterprise level, the five force model,  value chain and the generic strategies. We're going to look at several models he developed, including that five force the value chain and generic strategies in just a moment. So when we look at competitive advantage, and through the lens of  Porter, we're going to be looking at creating and sustaining superior  performance, so not just doing well, but sustaining that high level of  performance for your organization, and having people notice and choose you  over someone else because of this high level of superior performance. So when  your organization can sustain profits that exceed the average for the industry,  that's how you know you've got the competitive advantage. So in other words,  you know when you're killing it compared to your peers, you've got the  competitive advantage. Example, I was going to write Google's strategy, but I  forgot the word strategy. So this should just say Google was an early or.  Adapter, I think Apple would also be sustaining that competitive advantage.  Surely you can think of others that are doing something that sets them apart to  have superior performance over time on a trending level, that just keep that  superior performance on top. So not just creating it, but the sustaining is the part that really will keep that long lasting competitive advantage and keep you, you  know, competitive in the field with your peers. There's only if we look at a at the  market, and you look at who your target market is, for customers or clients or  consumers or users, or whatever the case may be for your particular enterprise  organization. You know the pie is, let's say the pie is this big, it's not going to get any bigger. How many pieces of that pie is your organization going to get?  Because this is how many users there are total. So how big of a piece is your  pie going to be? And that's your competitive advantage. So we're going to move  forward with Porter, with one of Porter's strategies. We're going to start with  Porter's generic strategies. And again, these are generic in terms of a strategy to keep yourself competitive. So offer the lowest prices possible. So cost is a very  generic strategy to keep that competitive advantage by having the lowest price,  and we know that just because you have the lowest price, that's not the only  thing you're communicating, right? If you are shopping for something, and  there's one product that has significantly lower cost than everything else, you  could probably draw some other inferences there too, in terms of what the  quality might be of that product. If it is significantly lower cost than others, you  might sell a lot, but your target market might change, and you might be now  appealing to a different audience than you did before. So you want to make sure that you're kind of on top of that. Other than cost, we want to talk about  differentiation. And this is something very unique, a product or a service that  you're offering that's different. It offers a unique value that people can't easily get somewhere else. They're going to come to you because you're different. Maybe  it's your packaging, maybe it's your your customer services doing something 

that that others aren't. You're offering some type of hook that's different, that's  going to have someone choose you over your competitors. And then there's  focus. Maybe it's that you are super wide focus, and you are in you're focusing  on the entire industry, and you do it all, and that is appealing to that customer  base, or maybe it's you're going to get that advantage because you are  extremely narrowly focused, and you're not serving the entire industry. You're  serving this one small market segment, but you're doing it really well, and you  are dialed in, and you know exactly what they want, and you're giving it to them.  So that focus is going to be another one of Porter's generic strategies, and we're going to look here that strategic advantage and competitive scope of just putting those into quadrants for you, for these generic strategies. So we've got overall  cost, it's going to be obviously up there in the corner of the lowest cost position,  and that's for the whole industry. And then for a tiny segment, it's going to be the cost focus as well differentiation. And then differentiation focus again, as we get  focused on one particular market segment. So that is for cost. Oh, there we go.  So now we have, there we go. I got them all. Let's hear some examples of  organizations that are using these. So being different. Industry wide, we're going to go with Samsung Galaxy being the lowest cost position. Industry wide, we're  going to go with Walmart being unique. Having that unique perception by the  customer, and one tiny segment, we're going to call that differentiation focus.  REI, we know exactly who their customers are. It's for they're not selling to  everyone and and they're they're focusing on people who are interested in doing one type of thing. Those outdoor activities, they're very specific in what they are  focusing on, and their customers perceive them as unique. That is their  competitive advantage there, just like Walmart's is the low cost for the entire  industry, and then that focusing on a particular segment. But then also trying to  be the lowest cost in that particular segment would be big five. So hopefully  these are some examples that might help you kind of look through Porter's  generic strategies. And next we're going to move on to Porter's value chain.  Okay, so we're going to look at, I know there's a lot going on here. We're not  going to go through every word of this slide, but this is to give you the value  chain analysis for manufacturing firms. So we're going to look at the  infrastructure for the firm, looking through the administrative roles, the  management, the accounting, finance, strategic planning, what the infrastructure is for the firms. And then we're looking at HR, how they get employees, how they train and retain and recruit. We're going to look at the technology development,  so the research and development, the process improvement that we have, the  procurement, how are we going to purchase raw materials, machines, supplies,  all of those things. And then if we look down at the bottom of those primary  activities, we're not going to go through each one of them right now, but those  kind of those primary activities, are going to inform the chain that is the value  chain analysis. So the next slide, we're going to see some of those inbound 

logistics and operations we're going to we're going to talk about that bottom row. So we're not going to go into it right now, but once we look at that margin on the  right hand side, it takes into account everything from our firm infrastructure down to those specific primary activities, like our inbound logistics, which is things like  

our raw materials that are brought into the company to work with and working  with outside vendors to to get those prepared for what we're manufacturing. Our  operations, which is any part of the business that converts raw materials into our finished products and services. How we operate, how we get that done, how we  go from raw materials to a widget at the end of the day, and then our outbound  logistics is so now we've made the widgets. Now, how do we get them to the  customers? Or if we have a service that we're providing, how are we going to  get that good in those services out to our target market, who is, who's using us  for one, one of or more of our competitive advantage reasons. So this value  chain starts with these primary activities, and then we go up the chain here, the  sales and marketing, our entire buyers to purchase products and service. Sales  and Marketing is pretty self explanatory. Our service. So if someone has a  problem, that if a customer has a problem, if they have a question about any of  our just offering support. So otherwise, if you don't have this in place in the value chain, you're going to have a gap where you're going to be pulling people from  doing other tasks that are really necessary for for them to to be competitive. And we want to make sure that we have people who are specifically there to take  care of those questions and problems that might arise once you get up to that  firm infrastructure. This is what we talked about, all those organizational  functions supporting the business, your technology department, your human  resources, how all of those things work together. And then finally, we've got the  technology development, which is advances in innovations adopted to add value to the company, and then procurement of just purchasing our raw materials. So I know that was a lot to say that again, this is what the finished product would  look like. So when we use that value model in a CRM, we're going to be looking  again at those primary activities at the bottom, and then those things across the  side are going to be our support activities. Those things at the top, those support activities are going to be our enterprise resource planning ERP. And we, we  talked heavily about ERP in the software module. This is going to be the  automation and kind of the guts of your organization on how you you manage  the day to day operations, and how you're going to make sure that you are  prepared for what you need to purchase. And when things get shipped out, and  when a customer makes an order, it then triggers another process, which puts  manufacturing into place, which then triggers another process to have shipping  and quality control into place. All of those trigger. Years that happen as part of  our ERP, our enterprise resource planning, to make sure that your organization  has what it means, where it needs it, when it needs it. So those are going to be  those support activities at the top with our, you know, Michael Porter's way that 

he talked about that strategic focus was to be that those those activities  happening at the top will then turn into support activities once it is once the  chain is set that the primary activities at the bottom are going to inform those  inform those at the top. So so the supply chain management are going to be  those inbound and operations that we talked about with what we're buying and  how we put the thing together, those supply chain do we have what we need to  get it done, and then our customer relationship management, our CRM that's  going to be the outbound, the marketing, the service, how we are going to  communicate with those customers once they have decided to purchase our  goods or services. Kind of how that all works together? Sounds really  overwhelming if we did not have these, IT tools that could help us keep it all  together, because, as we were just saying, these events don't happen in a  vacuum. These events trigger other events. So we are there is a system in place with our IT department that is going to automatically order materials we need  and make sure that they arrive at the right place for the right person who needs  it, to build whatever product it is, or whatever service you're providing, which will  then again trigger all of those things to get them outbound and to market, to our  our target market, and to advertise and pricing Pricing at the right point, with  dynamic pricing to make sure we're competitive, And then shipping it out, and  then having the service agreements at the end, and making sure our customers  are happy. All of those things are part of our CRM, our customer relationship  management. So these things all work together, the ERP, the supply chain and  the CRM, they all work together as part of this value chain model. So so you  really need strength and every area of that chain, and I a lot to unpack here. It is one when we talk about the the generic strategies from Porter, those were a little a little less complex. This value chain model is a little more complex. And the  next one that we're going to do is Porter's Five force model. We're going to talk  about that in just a second. Okay, so at the center of this model is an intra intra  industry rivalry or a competition within the industry. So we see so how  competitive is the market. Think about McD's. If you've ever been to  McDonald's, how many other fast food chains are in the market competing with  you? There's Burger King, there's Wendy's, there's In and Out. There's all these, all these places where you can go get a burger. So how does McDonald's  compete? Right? It's a very competitive marketplace, and they need to  distinguish themselves, either with higher quality stuff or, whoops, sorry. Get  back here. Here we go. They need to distinguish themselves with either higher  quality or lower cost of service, or being different, like we talked about, and  being totally unique. So with McDonald's, they offer really fast fast food at a very reasonable price. So that's kind of their hook. People are on the go. They have  kids in the car. They want a happy meal. They want it fast they don't want to pay a lot of money. That's where you go there. So the next competitive force is the  threat of new entrants. So we looked up at the top of this five force model. So 

how many companies are seeking to break into this industry. So when talking  about fast food, fast food, Are there lots of people that are trying to be the next  Wendy's or or whatever the case is, whatever fast food you like, the next  McDonald's, and probably not a lot, because of the cost that it would really have  to compete with these big, established fast food giants that would just be cost  prohibitive to compete in that marketplace. So this one, this threat of new  entrants, is going to be relatively low for this one. So although in the very, very  center the industry. Rivalry is very strong, with some key players, that threat of  new entrants is relatively low. The third competitive force is that threat of  substitute products that's going to be down at the bottom. And this means that  other places your customers might go and go get what you offer. So let's say  there's Panera Bread, a Taco Bell and a pizza place, all of those regular  restaurants could be substitutes for what McDonald's is offering. So companies  need to consider those even though they're not directly selling fast food  hamburgers, they're also competitors. So you can think about competitive  pricing and features that would make people choose that fast food, hamburger  from McDonald's over things like other choices, like Panera Bread, Taco Bell  pizza, or whatever. So the fourth one, so when it comes to food, that threat of  substitute products could be relatively high depending on the price point. If you  had McDonald's in mind because you wanted something off the dollar value  meal, that might be, that might be where you're going, no matter what, if you  have an open mind and you want something fast, but it doesn't have to be  burgers. Now we have a whole new can of worms so that one could be relatively high. We're going to look at the fourth factor, the fourth force. Excuse me, this is  for bargaining power of buyers. In the case of McDonald's, that means you and  me. So how are we going to come? How are we going to bargain? Do we have  a choice on what we eat, and there's lots of fast food restaurants that we could  go to, so our bargaining power is really high here we could choose something  else. So I think, you know, voting with your wallet is a very powerful way to make your your preferences known when you are deciding what to buy or what not to  buy, our bargaining power is very high. If the line is too long at McDonald's and  the place next door is giving away food, or if the line is really short, they can go  across the street and eat there instead. That bargaining power of buyers on the  right hand side is very strong with our example of fast food hamburgers, once  we get into more really specific industries, a lot of times there is no bargaining  power this one would be very low in terms of if you want something that the  price is what it is, and you don't really have other options, your bargaining power is severely damaged, and you pay whatever it is a lot of times. What I'm thinking of now is right now, we are experiencing a very rapid and high, high increase in  gasoline prices, and so we don't have a lot of bargaining power as buyers for  that right now, because you know what? We need it. If we can't go, can't dig a  hole and get IT ourselves, we can't go across the street and get it somewhere 

cheaper because we can't. So the bargaining power of buyers really goes down  in this scenario. However, on the bottom, if we look at that threat of substitute  products again, there are a lot of people saying, You know what, I'm going  electric at this point and choosing a substitute instead of a gasoline powered  vehicle to get, to get around it that way. We do have one last force. The fifth  force that we're going to talk about here is the bargaining power of suppliers,  and that's for companies that support the products and services that lead fruit to  you getting that the gasoline or Let's go, sorry, let's go back to the fast food  example. So all the companies that come together that lead you to getting your  Whopper, it's not a whopper at McDonald's Big Mac. So whatever companies  are supporting that. So the beef vendor and the bread people who sell the buns, and the people who sell uniforms to McDonald's for their employees, and the  cleaning supplies and the insurance companies that provide the health care to  those employees, and all of those things that go together, the people who sell  the grease for the fryer, and all The things that come together so that you can  get a wrapped up sandwich. What happens? You know, they make McDonald's  run. So if those companies that sell beef become really scarce, like only two  companies you can buy beef from, then that the power that. Supplier power is  really high. They can charge whatever they want, and they can make, you know, their their deals aren't going to be as competitive that supplier, supplier power  would be really high. They can raise their price. McDonald's is going to have to  pay it because you can't make hamburgers without beef. On the other hand, the  uniform manufacturer. Let's say they decide to increase their price by a lot, and  McDonald's can just switch to a different supplier. They're not going to lose a lot  of business. You buying a hamburger. You don't care what company is supplying the McDonald's uniforms. So that would be a very low bargaining power for  those suppliers for uniforms. There is a sixth force, if we look up in the very, very corner, and that is going to be government regulation. And so when we talk  about government regulation, this is going to be just on, on if there are  regulations that come into place, whether you already have your strategy in  place or not, this is going to be something that also impacts the way you do  business. And a lot of times this is going to be another one where you don't  really have a lot of bargaining power here, where you have there are regulations that will come into place, and you need to meet them. So that is a sixth  competitive force. But we are going to focus on the five forces right here first.  And we just, we just discussed the, I won't go through and in depth again, with  these five forces, because I think you've got it here. Okay, entry barriers, so as  we're talking about, if you want to get into an organization we already talked  about in McDonald's. It's not going to be a ton of new fast food joints. It's just  cost prohibitive to be competitive on that scale with these giants that are already so well established. So creating that barrier to entry would to, would be  competitors is something that might be beneficial to an organization. For 

instance, there is a set number of liquor licenses in a certain area that can that  can be, if you want to open up a brand new bar, you're going to need to have a  liquor license, which is at a cost point, because they are limited that might  prohibit new entrants to joining the market. You know, if you want to, if you want  to be the next Amazon, probably, probably good luck with that. There's no way  that you could compete with the established branding and brand recognition and the infrastructure in place, the supply chain in place. The you know that now,  decades of this infrastructure that is now a machine that is Amazon, you can't  just enter the marketplace. There's just no way, the same way we're talking  about with the with the fast food. Now, there's lots of other industries where  those entry barriers are very low. For instance, let's say you want to start a yoga  studio, and you're starting a yoga studio in a town where there's one other yoga  studio. Why not? Why not hang a shingle and start your own organization? Start your own business. Those barriers to entry are just, you know, the cost of the  cost of the physical space to lease and some simple marketing. So when we talk about some of these industries, they're going to be much different in terms of its  barrier to entry, switching costs. This is going to be those costs for a consumer  to switch to another product. We're just going to make it easy for our people to  stick with us. We want to make them like us and stick with us. And we're going  to do everything in our power, including all of our IT tools to make sure that they  don't go elsewhere. Maybe that's a loyalty program where you collect stamps, or you collect points, or you collect purchases, Sky miles, whatever that case may  be. Maybe there's a contract that's in place that you have to use them for  whatever the good or services for a certain amount of time, or you you have a  membership that would be very cumbersome or tricky to cancel or change. So  we want to make sure that once we've acquired that customer, sometimes it's  very expensive, and we we use a lot of our resources, our IT resources, our  marketing, our money. Our people to acquire a customer. So once we we've got  them, we want to make sure that they're not switching, that we're that we're  keeping up. Okay? And here's in a nutshell, again, with the cost, the  differentiation and the focus, and then those five, those five forces of Porter's,  the entry barriers, the buyer, power supplier, power threat to substitute, and the  rivalry. And we're going to just look real quickly on we're not going to go through  each one of these, each one of these squares, but I would recommend that you  really, really do go through in the reading and see how the generic strategies do  really interface with the five forces that were all implemented by Porter. Okay, so we've talked a lot about what is competitive advantage, and now we're going to  talk about how we use our information systems for competitive advantage. So  we know competitive advantage means we're killing it. We have a big piece of  that pie. We have a big, bigger slice than maybe some of our peers do that we  are we're doing well financially as compared to them. So that's our competitive  advantage. So how do we use IS information systems to achieve this? And 

that's going to be looking at our business process management systems.  Control of processes gives competitive advantage. Because why once things  are like a well oiled machine once there are processes in place, we know that  that's a big job of information systems to get those processes in place. I am a  Lean Six Sigma Black Belt, so I have a very strong place in my heart for looking  at process development, process improvement, and information systems play a  huge role when you're looking if you're familiar with Lean Six Sigma, or if you're  familiar at all with process improvement, we use a lot of Information Systems  tools to achieve those high levels of performance. And, you know, just improving those systems and processes, we're going to look at electric data interchange,  and that's going to be the automation of the value chain gets products to market  quicker. So we're going to use those information systems of automation to get  our stuff to the market faster than our competitors, so that, you know, we get  picked. We want to get there first. It allows for integration of partners in the value chain, so that we don't have to do everything in a vacuum or in a silo. Once  those information systems and networks are in place, we can go ahead and  integrate and we can have some partners. It'll allow for a flexible value chain.  Because of automation, we can do things in like a just in time manner, instead of being kind of stuck and married to a process that might be out of date or no  longer appropriate. Aha. So we've got collaborative systems so easy, easier  ways for people to collaborate in works and processes. So these might look  familiar to you. These are ways that our people can collaborate to gain that  competitive advantage, Google Drive, Microsoft, SharePoint, a WebEx, Lotus  Notes, all of these collaboration tools that are information systems that really do  help for those collaborations. Next is that decision support systems. And this is  going to be how we make decisions. It might be a a an algorithm that is in place  automatically as part of your information system strategy that goes through and  looks at purchases over time and adjust the price accordingly in a dynamic  structure to make sure that you are remaining competitive with your pricing,  assisting with those decisions at all levels, semi structured, we're going to be  looking and analyzing that data that I was just talking about, looking at all those  tiny pieces of data to make them information, to make them knowledge, to make them wisdom. And then internally, we're going to have centralized data that can  that can give us opportunities for insight, and then externally, our day, our data  sources can inform strategic decisions about your industry, what's going on,  some trends, new technologies, all of those things. So I know that was a lot of  information at you, and I'm so happy that you're you're sticking with me here.  We're just going to go ahead and and kind of give a summary here on what we  talked about today, and that's going to be defining that productivity paradox. And I wish we were in a room together. I would love to ask you, what do you think?  What do you think about that productivity paradox? Does IT and implementing IT and doing it well? Does it really increase productivity? And I'm sure there's not a 

yes or a no answer. I'm sure this is on us, on the spectrum, but I want to know  your take and your organizations on how that works. So I I wish we could sit  together and talk about that. We evaluated Carr's argument, and does IT matter, why the data pointed at the time in 1993 to know it does not matter, and how  that might be different with a different baseline now, of it standards and  expectations. We reviewed the components of competitive advantage. What  makes an organization competitive? How do they compete, whether that's by  being different, whether that's by being the lowest cost, whether it's by being  really broad or by being hyper focused, how you can be competitively, how you  can be competitive in your in your industry. And then we talked about how we  can gain that competitive advantage using information systems and  collaborating together and being first to market, and having our supply chain  locked in, and having, you know, just in time ordering, and all of those things  that are going to keep us competitive. And they're all good things. So thank you  for hanging hanging in here with me and talking about, does IT really matter?  And we talked about all the reasons it does and and how we can stay  competitive as an organization using some of these tools. So next week, I am  excited to talk with you about our about business processes, so we're going to  jump right into that next week. Thank you. Have a blessed week, and I will see  you soon. Thanks.